The US stock market watchdog sued Binance, the world's largest crypto exchange, accusing it of violations including mixing billions of dollars in customer cash with a separate trading company owned by its Executive Director.
The 13 civil charges filed Monday by the Securities and Exchange Commission are the latest regulatory blow to Binance and his boss, Changpeng Zhao, after he was sued by another US financial agency in March.
The allegations include operating unregistered exchanges, broker-dealers, and clearing agencies, as well as misrepresenting trading controls and oversight on Binance's US platform. Between mid-2018 and mid-2021, the group earned at least $11.6 billion in revenue, according to the SEC complaint.
The SEC alleged that Binance and Zhao were in control of client assets, allowing funds to be merged or diverted, with billions of dollars sent to a British Virgin Islands-incorporated crypto asset trading firm owned by Zhao called Merit Peak Limited.
The assets were also allegedly diverted to a separate entity owned and controlled by Zhao, Sigma Chain, which the SEC says engaged in โmanipulative tradingโ that inflated the trading volume of the Binance US platform.
โAcross 13 counts, we allege that the Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, failure to disclose, and calculated evasion of the law,โ said SEC Chairman Gary Gensler.
Binance.com, Binance's offshore trading platform, said it was disappointed and discouraged by the SEC's action, adding that while it took the regulator's allegations seriously, "they should not be the subject of a SEC enforcement action." SEQ". Binance US called the lawsuit "baseless."
The SEC alleged that although Binance and Zhao "publicly asserted" that US clients could not access Binance.com, they "subverted their own controls to secretly allow" major US clients to trade on the platform.
โWe allege that Zhao and the Binance entities not only knew the rules of the road, but also consciously chose to evade them and put their clients and investors at risk, all in an effort to maximize their own profits,โ said Gurbir Grewal, director of Binance. the enforcement division of the SEC.
According to the SEC complaint, Binance's anonymous director of compliance told a colleague in 2018: "We're operating like a fucking unlicensed stock exchange in the US, bro."
The SEC's action comes weeks after the US Commodity Futures Trading Commission, a regulator of derivatives markets, filed a ruling in March lawsuit against Binance alleging that it illegally served US clients, and that much of its reported trade volume and profitability comes from โextensive solicitation and access toโ US clients.
โFighting two powerful regulators at the same time will require precious time and resources, and Binance will no doubt feel the impact,โ said Charley Cooper, former CFTC chief of staff.
Binance said that "the SEC's actions here appear to be part of a hasty effort to claim jurisdictional ground from other regulators, and investors do not appear to be the SEC's priority."
Also in March, the Financial Times revealed Binance, which has long claimed to have no formal headquarters, concealed extensive ties to China for several years.
A month earlier, regulators in New York shut down the issuance of a Binance-branded stablecoin, a type of digital token that allowed cryptocurrency traders to quickly enter and exit the market. Before closing the coin, called BUSD, accounted for about 40 percent of Binance's trading volume.
